One man's journey to financial independence.

Baby AAI’s Portfolio – Year 1 Update

Baby AAI is now walking and his portfolio is making some strides as well. He’s not talking yet and has no idea what a portfolio or equity is yet though. That’s perfectly ok because there is lots of time for compounding to work and for me to teach him about investing.

I funded Baby AAI’s account with an initial $7500 in a taxable account and have been contributing $100/week since 02/27/17, so we’re almost at the one year mark.

I made a recent transaction last week and swapped out PEP for a little more of HBI. HBI fell to below his cost basis and I couldn’t resist adding a little more under $20/share. I can always add PEP back later if I wish. So far HBI has been up and PEP has been down so it was a good trade so far. Just to be clear, I don’t plan on doing much “trading”, I plan to mostly buy stocks to hold and let them DRIP. I also added some RDS.B recently.

Below is the current portfolio after a year. Carter’s is killing it from my initial purchase, up over 38%! I actually don’t mind some of these positions staying lower for a while so I can get more shares in the near-term from compounding.

This is still a really short time frame to compare gains and losses. The account is currently valued at $13,448. That’s above my projected amount of $13,225 assuming 7% compounding, see graph below. This portfolio still has a long time to compound and all shares but RDS.B are currently turned on to DRIP. In fact I’ve already added fractional shares of DIS, CRI and HBI by DRIPing.

I’m hoping to achieve a 7% CAGR which will put the balance right at $200,000 by the time he’s 18. That’s by doing nothing else but contributing $100/mo and letting the power of compounding work its magic. I used a simplified actuarial formula assuming $7500 contributed right away and $5200 ($100/month) contributed at the end of each year.

Here’s a graph of what the value should be at the end of each year, of course the stock market has large swings up and down so this is in a perfect world of 7% compounding each year.

So basically, by the end of the first year, February 27, 2018, the portfolio should be valued at $13,225.00. I’m currently slightly ahead of schedule.

I’m not a big fan of ETF’s since you are paying management fees. I would rather construct my own portfolio avoiding these fees. The only ETF I currently hold is in my Roth and is VOO, that tracks the S&P 500.

Great update. Time flies as you will see and simply staying invested will surely generate an ever growing passive income. Not sure I would have “swapped” PEP for HBI. I know you mentioned you don’t plan to trade in this account and that’s good advice. Just buy and hold those quality names unless some major change to the business is at hand. Baby DivHut has stocks up and down but it’s the passive income we’re going after. Thanks for sharing.DivHut recently posted…Dividend Income Update January 2018

Staying invested and continuously contributing should provide ample returns. I couldn’t resist HBI under 20 so I made the swap. I don’t plan on doing a lot of trading but I find HBI a better value currently than PEP. PEP is obviously a wonderful company that I’d still love to own more of at the right price. Good luck with Baby DivHut’s portfolio!

I’m familiar with all but Danaher, I’ll have to take a look at that one. You know I started adding a small amount of BRK.B , They have a huge amount of cash and are looking for a big deal, cash is king in a rising rate environment. I’ve already got an overweight position in JNJ so won’t be adding to that one. BA and BLK are interesting though.

Baby AAI is one lucky dude to have a portfolio like this started early. Keep up the great work. He will be able to buy a nice house all cash and then collect rent from his college roommates, If he wants. Great start to FI.Money Hungry recently posted…Stock Purchase February 2018

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I am not a licensed financial professional. I created this site to be informative and entertaining. No purchases I make are recommendations to buy those particular equities. I'm not liable by any party for losses you might incur. All investments are subject to losing money and you should consult a financial professional before making any investment decisions.